Small businesses will benefit from a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders, the Chancellor has announced.
Rishi Sunak said the new Bounce Back Loans scheme, which will provide loans of up to £50,000, would help bolster the existing package of support available to the smallest businesses affected by the coronavirus pandemic.
The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days, and comes alongside the £6 billion awarded in business grants, supporting 4 million jobs through the job retention scheme and generous tax deferrals supporting hundreds of thousands of firms.
The government, which has been consulting extensively with business representatives about the design of the new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.
The loans will be easy to apply for through a short, standardised online application. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.
The Chancellor of the Exchequer, Rishi Sunak, said: “Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis.
“This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.”
The scheme will launch for applications on Monday 4 May. Firms will be able to access these loans through a network of accredited lenders.
The government will work with lenders to ensure loans delivered through this scheme are advanced as quickly as possible and agree a low standardised level of interest for the remaining period of the loan.
The Chancellor’s announcement shows that he has listened to the concerns of local builders who have struggled to access affordable finance during the lockdown, said the Federation of Master Builders (FMB). However, with many small to medium-sized (SME) construction sites still shut, an SME Support Fund that issues grants, instead of loans, is needed to help builders get back to business once lockdown ends.
Brian Berry, Chief Executive of the FMB, said: “The Chancellor has listened to local builders’ concerns about cashflow, raised by the FMB, and brought forward a simple loan scheme for viable firms. This marks a positive step when just 4% of builders were able to acquire credit through previous schemes.
“Cashflow is currently builders’ biggest headache because many construction sites remain shut. The combined challenges of accessing scarce materials, working safely in a client’s home, and protecting the health of the construction workforce, has left many firms unable to continue bringing income in. An SME Support Fund in England, and Northern Ireland, similar to the ones in Scotland and Wales, is needed to issue grants and ensure that these firms can hit the ground running post-lockdown. Builders, and the construction industry, will thrive if they are able to reinvest their profits back into the economy, rather than paying back a loan.”
Dame Carolyn Fairbairn, CBI Director-General, described the loan scheme as “transformational”
“Sole traders, micro-firms and entrepreneurs will now have a simple route to fast finance to stay afloat, without red tape or time-consuming checks,” she added.
“Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster.
“It’s good to see the Chancellor listening to business, proving that where there’s a need to adjust schemes, he will do what it takes. It will be vital to maintain this approach in the months to come. Every job saved today will ensure a faster recovery tomorrow.”
